Are you in a dud super fund?
Industry analysis reveals members are not switching out of underperforming funds.
Key points
Industry analysis found 850,000 people did not switch out of underperforming funds.
Resulting losses reached $1.6 billion in 12 months.
Super regulator shares data for better consumer ‘transparency.’
A new report that found that members of superannuation funds which failed performance tests and remain with the ‘failed’ fund may be worse off to the tune of thousands of dollars a year.
Industry Super Australia has found 850,000 people who remained with underperforming MySuper products lost a combined $1.6 billion in 12 months by failing to switch funds.
That is an average of $1900 per person, Industry Super Australia found.
A MySuper fund is the default superannuation account an employee is provided if they do not nominate a superannuation account when starting in a new job.
The Australian newspaper says if a typical worker remained with the poor-performing fund for ten years they would be $25,000 worse off, while a 30-year-old stapled to a bad fund for the rest of their career could be $225,000 worse off at retirement.
Last year, financial services regulator the Australian Prudential Regulation Authority (APRA) failed 14 MySuper products, forcing them to contact their members and encourage them to change funds.
However, only 10 per cent of members switched, and Industry Super Australia Chief Executive Bernie Dean says many people do not think about switching “until it’s too late”.
He told The Australian, “We are quite worried that hundreds of thousands of Australians might be sitting in these underperforming funds, languishing with high fees and poor returns.”
Industry Super Australia says there is a huge cost to doing nothing if you are in a dud super fund.
“Lots of people don’t know you can be stapled to a super fund that has failed the government’s performance test, and that could punch a huge hole in a person’s nest egg,” Mr Dean said.
“It is up to the government to tighten consumer protections, so people are only stapled to the best funds that have passed the performance tests.”
Mr Dean urged super members to take a few moments to check where their super is and then compare how it is performing against others.
Evan Poole from Australian Retirement Trust echoed the sentiment that super members need to be active in monitoring their superannuation, taking extra steps to make sure their account is performing as desired: “When checking your annual statement each year, check to see that you have adequate insurance cover and are happy with your investments and returns. Perhaps also consider your contribution levels, do you need to make extra contributions to grow your nest egg?"
Information on the number and types of superannuation products and investment options is now available in one online place, making it easier for consumers and investors to better track the super industry.
That is the hope of the Australian Prudential Regulation Authority (APRA), which has released the first in a series of new statistical publications, it says improves the transparency of the superannuation industry.
The inaugural Quarterly Superannuation Industry Publication includes new and expanded data collected as part of APRA’s recently introduced Superannuation Data Transformation reporting standards.
It also includes quarterly data on member demographics, such as gender, age, and account balances, which were previously published annually, as well as improved classification of MySuper product asset allocations.
Key insights from the new publication include:
- As of 30 June 2022, there were 69 MySuper products, 956 Choice products (a Choice fund is a super fund that people have actively selected), and 142 Defined Benefit products (a Defined Benefit fund is one where the benefits are calculated by a predetermined formula) in APRA-regulated entities with more than four members.
Of the $1.95 trillion in member assets held in these products, 41.5 per cent is held in MySuper products, 51 per cent in Choice products and 7.5 per cent in Defined Benefit products.
In the Choice product segment, there were around 10,000 multi-sector investment options, 30,000 single-sector investment options and 116,000 direct asset investment options available to members to invest in directly, such as shares or term deposits.
For further reading: The Australian and APRA
